After applying for a credit card, most card issuers can tell you whether you've been approved in a matter of minutes based on your credit score and income. In select cases, approval may take longer, with the decision coming in a letter by snail mail seven to 10 days after applying.
Here's what you should do immediately after getting approved for a credit card.
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1. Get the details on any promotions
If the card offer included promotional benefits -- 0% APRs, sign-up bonuses, or other perks -- take notice of the terms and conditions of the offer.
If the card offers a sign-up bonus, be sure to read the fine print as it relates to the minimum spending requirements. Most sign-up bonus cards require that cardholders spend at least $1,000 in the first 90 days after account opening to qualify for a $200 cash bonus, for example. These bonuses can be lucrative, but note that the spending requirement is based on when the account is opened, not when you receive your card in the mail. You can get clarification on the timeline with a quick message to customer support. It would be unfortunate to fail to meet the minimum spending requirement by a few days, given just how big sign-up bonuses can be. (The largest sign-up bonus in the Fool.com database is currently worth $625 of travel.)
Cardholders who applied for a 0% intro APR card for purchases or balance transfers should pay attention to the details of the promotion. In some cases, 0% promo balance-transfer offers allow for fee-free balance transfers when amounts are transferred in the first 45 days after account opening, so it's in your interest to act quickly and transfer any balances as soon as you can. Again, speaking to customer service can be helpful in determining the cut-off day for specific perks, and when the 0% promo APR will revert to a card's standard interest rate.
2. Avoid interest charges
Unless you have a 0% promo APR period, interest on your balances will pile up if you don't pay your bill in full each month. To avoid interest on your purchases, you'll need to ensure that you pay at least the "statement balance" each month.
Note that the statement balance is not the "minimum payment" amount. The minimum payment is just the amount you have to pay to avoid a delinquency on your credit report. If you pay only the minimum payment, you'll incur interest charges on your account. Pay the statement balance, which should be greater than, or equal to, the minimum payment each month.
If you fail to pay the statement balance in any given month, you can expect to pay interest on two months of balances before getting back into your credit card company's good graces. It all has to do with the complicated way in which a credit card's grace period works.
3. Understand the rewards program
Credit card rewards programs are not created equally. Some travel cards are very lucrative when points or miles are redeemed for travel, but most travel programs pay out at a discounted rate if you redeem for cash.
To this end, it's also helpful to understand how points, miles, or cash can be accumulated fastest. Some cards offer bonus rewards in rotating categories, but only if you enroll in the program each quarter by logging online. Others have bonus categories that pay out a higher rewards rate on certain types of spending (groceries, restaurants, travel, and so on), and thus you should be mindful of which cards offer the beefiest rewards on any given type of spending.
4. Got perks?
Credit cards often come with a number of perks that get hidden in the fine print. These features include additional insurance protection for car rentals, travel insurance, or purchase protection, which refunds the difference if a product you purchase is advertised at a lower price in the future.
Two of my favorite perks:
- Free collision damage waiver (CDW): This perk kicks in when you pay for a car rental with your credit card. If you return a car with damage, a "primary" CDW benefit will pay out before your personal insurance. A "secondary" CDW benefit, which is more common, will pay out after your personal car insurance and thus cover your car insurance deductible or damages in excess of your insurance coverage. For primary coverage, you'll usually have to pick an annual-fee travel card to get the benefit. Given that rental-car companies charge as much as $15 a day for collision-damage waivers, I consider this one of the best perks credit cards offer.
- Purchase protection: Some cards offer purchase protection to refund you for the difference when a product is sold at a lower price 30 or 60 days after your purchase. This feature can come in handy for buying products in brick-and-mortar stores for immediate use and later filing for purchase protection when you find a lower price online. Restrictions apply, so see the terms and conditions that are specific to your credit card. This is one of the biggest credit card perks people don't know about, given that most cards offer up to $1,000 of purchase protection on an annual basis.
5. Don't forget the basics of responsible credit use
There are a few best practices to consider when using your new credit card. In particular, it's important to always pay your bill on time. While late payments don't hurt your credit score unless they're more than 30 days late, late payment fees can add up to $30 or more, in addition to penalty interest rates that can top 29% per year.
Even if you pay on time, a credit card can harm your credit score if you keep a high balance. For this reason, it's important to keep your balances to less than 30% of your credit limit. So if you have a $1,000 limit, try to keep the balance lower than $300. A higher credit utilization ratio will result in a lower credit score, which can make it harder to qualify for other loans or cards in the future.
Responsibility goes a long way toward ensuring that a credit card is an asset, not a liability. Those who pay on time and in full, and who use their card just as they would cash or debit, get all of the benefits of credit without paying a dime in interest or fees. That should be the goal -- get the rewards that credit cards offer without paying a dime to your card company in interest or finance charges.
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